SEC News Digest

Issue 2011-49
March 14, 2011

Enforcement Proceedings

Petition to Lift Temporary Suspension of Carl W. Jasper Denied

The Commission has denied the petition filed by Carl W. Jasper to lift the temporary suspension imposed on him pursuant to Commission Rule of Practice 102(e)(3). The Commission has also set the matter down for a hearing before an administrative law judge.

Jasper was temporarily suspended from appearing or practicing before the Commission after the United States District Court for the Northern District of California found that Jasper had violated antifraud and other provisions of the federal securities laws, and permanently enjoined him from violating, directly or indirectly, the federal securities laws. (Rel. 34-64077; AAE Rel. 3253; File No. 3-14177)

SEC v. Robert L. Hollier and Wayne A. Dupuis

On March 11, 2011, the Honorable Tucker L. Melanšon of the U.S. District Court for the Western District of Louisiana entered final judgment against Robert L. Hollier (Hollier) of Opelousas, LA and Wayne A. Dupuis (Dupuis) of Youngsville, LA. Hollier and Dupuis were permanently enjoined from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Judge Melanšon ordered Hollier and Dupuis to pay disgorgement jointly and severally in the amount of $41,800 representing profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $11,288.64 for a total of $53,088.64. The Court also imposed a civil penalty against Dupuis in the amount of $41,800, the full amount of his insider trading profits. The Court ordered Hollier and Dupuis to satisfy payment of these amounts within 30 days of the entry of the final judgment. Hollier and Dupuis consented to the entry of the final judgment without admitting or denying the allegations of the Commission’s Complaint.

The Complaint alleged that during the latter part of August 2006, Hollier had knowledge of pending merger talks between Warrior Energy Services Corporation (Warrior) and Superior Energy Services, Inc. (Superior), the information constituted material nonpublic information, and that Hollier tipped Dupuis about the pending merger during a Canada hunting trip that Hollier and Dupuis both attended. The Complaint further alleged that on Sept. 18, 2006, the day he returned from the hunting trip, Dupuis purchased 5,000 shares of Warrior stock for approximately $85,000. Dupuis, who had no prior history of trading Warrior shares, sold the only two stocks in his portfolio to buy the Warrior shares. The Complaint further alleged that on Sept. 25, 2006, Warrior announced a definitive merger agreement with Superior. The Warrior shares, which were then traded on the Nasdaq National Market, increased in price by almost 70% on the news that day. The Complaint also alleged that on Oct. 3, 2006, Dupuis sold all of his Warrior stock for a profit of approximately $41,800. [SEC v. Robert L. Hollier and Wayne A. Dupuis, Civil Action No. 6:09-cv-00928 (W.D. La.)] (LR-21883)

SEC Obtains Final Judgments Against Three CEOs in Penny Stock Scheme

The Securities and Exchange Commission announced today that on March 14, 2011, the United States District Court for the Northern District of Illinois entered final judgments against Gary Heesch, David Calkins, Brad Nordling, and Francis Scott Widen in connection with their participation in a complex and wide-reaching penny stock scheme orchestrated by Chicago-area resident Frank J. Custable, Jr. from November 2001 until March 2003, when the SEC brought an emergency enforcement action and obtained a TRO shutting it down. Judgments in this case have previously been entered against 14 defendants and three relief defendants. Heesch, Calkins, Nordling and Widen were the last four named defendants remaining in the SEC’s lawsuit.

The Commission’s complaint alleged that Custable and at least 17 others violated various registration, antifraud and reporting provisions of the federal securities laws through the use of unregistered and fraudulent penny stock offerings. The complaint alleged that Custable accomplished this by obtaining and dumping massive quantities of improperly registered or unregistered shares of stock of at least seven different penny stock companies on the general public, generating net proceeds to Custable of at least $4.3 million. The complaint alleged that Custable obtained stock through fraudulent Form S-8 registrations (normally intended to provide for the issuance of stock as compensation to employees and consultants) fraudulent manipulations of Rule 144(k) holding requirements for resales of restricted stock. The complaint alleged that the penny stock companies received substantial financing from Custable in exchange for providing large blocks of unregistered or improperly registered stock that Custable dumped on the market through various nominee accounts held in the names of persons or entities he controlled.

Heesch, Calkins and Nordling were CEOs of three of the penny stock companies involved in the fraudulent scheme. The complaint alleged that each of them engaged in fraudulent conduct in furtherance of the scheme, including knowingly or recklessly entering into sham consulting agreements, signing fraudulent Form S-8 registration statements, and providing false declarations concerning past compensation purportedly owed by their companies in order to justify the issuance of large blocks of stock and to manipulate the Rule 144(k) holding requirements for the issuances so that the transfer agents for these issuers would remove restrictive legends on the shares, allowing Custable to then freely trade them. Widen was an employee of Custable during the scheme. The complaint alleged that he violated the registration provisions of the federal securities laws by signing bogus consulting agreements and opening nominee accounts for Custable, enabling Custable to conceal his involvement in the scheme.

The judgments against Heesch, Calkins and Nordling, which were entered with their consent and without their admitting or denying the Commission’s allegations: (i) permanently enjoin them from future violations of the antifraud and registration provisions contained in Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and at Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (ii) bar them from ever serving as an officer or director of a public company; and (iii) prohibit them from ever again participating in an offering of penny stock. The judgment against Nordling further orders him to pay disgorgement of ill-gotten gains in the amount of $44,000, plus an additional $25,570 of prejudgment interest. The Court found Calkins liable for disgorgement in the amount of $150,000, plus prejudgment interest of $94,360, but waived payment of these amounts and did not impose a civil penalty based on his sworn Statement of Financial Condition. Based on Heesch’s sworn Statements of Financial Condition, the Court did not impose a civil penalty against him either. The judgment against Widen, also entered with his consent and without his admitting or denying the SEC’s allegations, permanently enjoins him from future violations of the registrations provisions contained in Sections 5(a) and 5(c) of the Securities Act, bars him from participating in any penny stock offering, and orders him to pay a first tier civil penalty of $6,500.

In a related criminal proceeding, Custable has pled guilty to various federal charges arising conduct in the scheme, and on June 9, 2009 was sentenced to a prison term of 21 years. Calkins and Nordling pled guilty to securities fraud; both were sentenced to 5 years probation.

Self-Regulatory Organizations

Immediate Effectiveness of Proposed Rule Change

A proposed rule change filed by the National Securities Clearing Corporation (SR-NSCC-2011-01) to modify NSCC’s fee schedule and to clarify the scope and computation of certain fees therein has become effective pursuant to Sections 19(b)(3)(A)(ii) and 19(b)(3)(A)(iii) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 14. (Rel. 34-64065)

Securities Act Registrations

The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.

Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics

5.06

Change in Shell Company Status

6.01

ABS Informational and Computational Material.

6.02

Change of Servicer or Trustee.

6.03

Change in Credit Enhancement or Other External Support.

6.04

Failure to Make a Required Distribution.

6.05

Securities Act Updating Disclosure.

7.01

Regulation FD Disclosure

8.01

Other Events

9.01

Financial Statements and Exhibits

8-K reports may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.